Leveraging the low euro (avoid banks)

With Sterling hitting 1.40 against the Euro for the first time since pre financial crash days thanks to ECB quantitative easing, it makes spending in the Eurozone cheaper than it’s been for a long time. However most of the banks are adept at removing extra money from their customer’s accounts via transaction fees. A 2.75% transaction fee on non Sterling transactions is typical and may also include a minimum charge. ATM withdrawals abroad also usually incur a charge of around 2%. Some notable exceptions to this practice include Metro Bank who don’t charge transaction fees in Europe on their debit and credit cards and the Halifax Clarity credit card which doesn’t charge a fee anywhere in the world.

Travel money prepaid cards have been around for a while but are now an increasingly attractive way to avoid these transaction fees and lock in foreign currency at excellent rates. Ukash (I must declare an interest here!), FairFX and Caxton FX are disrupting the travel money market with their rates on currency exchange and ATM cash withdrawals. Ukash is seeing a lot of success in this market because of their strategy of combining market leading exchange rates with no fees for the card or ATM withdrawals.

An interesting innovation in this space is multi currency travel money cards where multiple currency wallets are linked to a single card and the consumer chooses which currency to use. Travelex are a leader here although their rates are not as attractive as some of the single currency cards. Travelex has also announced their new Supercard which is linked to a customer’s existing debit and credit cards so doesn’t need to be topped up. Supercard users avoid out of UK transaction fees but don’t have the benefit of locking in cheap foreign currency in advance; they just have to take the rate at the time of the transaction.

As consumers increasingly latch on to the benefits of travel money cards it would be good to see more banks following the lead of Metro and Halifax and removing transaction fees. However as with most products from the legacy banks, pricing is based on customer inertia and rarely attractive.